Gift-tax valuation of gifted property must include full market value where family-transfer exemption avoids unearned increase burden

For gift-tax valuation, the market value of a gifted plot is to reflect the price it would fetch in the open market on the relevant date, and a claimed reduction for unearned increase is not allowable where the society's transfer rule exempts transfers to an immediate family member or legal heir from that burden. In that situation, the obligation is not a deductible incident of the property itself, only a nominal transfer fee is payable, and the full market value remains the proper valuation base. The revisional order under section 24 of the Gift Tax Act was therefore justified, and the assessee's challenge to the valuation failed.

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Issues: Whether, for gift-tax valuation of the gifted plot, the market value had to be reduced by 50% of the unearned increase payable under the society's transfer conditions, and whether the revisional order under section 24 of the Gift Tax Act, 1958 was justified.

Analysis: The valuation principle under section 6 of the Gift-tax Act, 1958 requires estimation of the price the asset would fetch in the open market on the relevant date. The reduction claimed by the assessee was supported by authorities dealing with cases where the obligation to pay part of the enhanced value or other burdens was a constituent and binding incident of the property itself. On the facts here, however, the society's rule exempted transfers to an immediate family member or legal heir from the obligation to pay 50% of the difference between the market price and the original price. Only a token transfer fee of Re. 1 was payable by the transferee. The burden did not fall on the transferor assessee, and the exception for transfer to a legal heir took the case outside the line of authorities relied upon by the assessee.

Conclusion: The market value of the gifted property was not required to be reduced by 50% of the unearned increase, and the revisional order directing adoption of the full market value was . The assessee's challenge failed.

Final Conclusion: The revisional jurisdiction was validly exercised, and the gift-tax valuation was upheld without the claimed deduction.

Ratio Decidendi: Where the governing transfer condition expressly exempts transfer to a legal heir from payment of the alleged burden, the amount is not a deductible incident of the property for gift-tax valuation.

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